BC Hydro rate increases could quickly drive British Columbia’s industrial power prices from among the lowest in Canada to the highest, dealing corporations a disincentive to doing business in the province, according to the group that represents major power users.

Cheap power for industrial development has been a cornerstone of BC Hydro’s operations and provincial government policy since W.A.C. Bennett created the utility in the 1960s, so Energy Minister Bill Bennett’s recent warnings that ratepayers can expect rate increases makes industrial users nervous.

“When you do a proper comparison, (B.C.) is in the bottom third or half (for industrial power rates) across Canada,” said Richard Stout, executive director of the Association of Major Power Customers of B.C. “We’re not the lowest, we used to be.”

Quebec and Manitoba have cheaper industrial power rates now, Stout added, and where rate increases have been in the range of ordinary inflation, indications are that BC Hydro rate increases will need to be in the double-digit range.

“In a few years (of double-digit increases), we’ll have some of the highest rates in Canada and lose a lot of the business that we brought here, encouraged to come here, on the promise of low rates,” Stout added.

Bennett said the main driver of potential rate increases comes from BC Hydro’s need to spend some $2 billion a year over the next three years upgrading its infrastructure.

“All I can say to (industry) is that I’m well aware of the impact and my job, as is written in my mandate letter from Premier Clark, is to keep the rate increase down to as low as possible,” Bennett said.

However, Bennett added that “we’re not there yet” in terms of balancing off Hydro’s need to upgrade versus reducing the utility’s costs in such a way as to minimize rate increases.

“I’m well aware of the danger of rates going up too fast,” Bennett said. “I think we’re going to have to let rates go up, hopefully we can spread it out over several years.”

B.C.’s industrial users, mostly pulp and paper mills, sawmills, mines and chemical plants, consume about 32 per cent of BC Hydro’s power, according to the utility’s latest electrical-load forecast. By way of comparison, the province’s residential sector consumes 35 per cent of BC Hydro’s sales of electricity.

And rates for industrial customers have increased.

Last December, then-energy minister Rich Coleman launched a review of B.C.’s policies when it comes to industrial electricity.

As part of that process, Catalyst Paper Corp., BC Hydro’s largest single industrial customer, made a submission highlighting a comparison of rates among 22 jurisdictions across North America compiled by Hydro-Québec in 2012.

The data showed that the average price BC Hydro charged industrial customers in Vancouver increased 24-per-cent over the previous four years, with prices hitting $49.90 a megawatt hour in 2012 compared with $40.30 in 2009.

By contrast, Manitoba’s industrial rates for Winnipeg increased just seven per cent (hitting $36.90 per megawatt hour in 2012) and Hydro-Québec’s rate remained relatively stable ($45.10 per megawatt hour).

Electricity is Catalyst’s second-biggest input, accounting for 15 to 20 per cent of production costs, the company said. And rate increases aside, the submission noted that the re-application of provincial sales tax on its electricity purchases will add another 27 per cent to its bill.

Having recently exited bankruptcy protection in a process that saw Catalyst slash its annual operating costs by $78 million, the company said in its submission that power rate increases were “rapidly becoming uncompetitive.”

Stout said industrial customers understand that rate increases are inevitable; however, they are asking for Victoria’s support in putting the utility under more scrutiny by the B.C. Utilities Commission.

“A better-regulated utility would have done whatever is necessary to maintain its infrastructure, to maintain its lines, to acquire more power more cost effectively than (it has),” Stout said. “And they should consider maybe not flowing those costs through to rates.”

Bennett said that strategy will have limited value in short-term rate considerations for Hydro. However, in the longer term, he said he has an interest in reviewing the way the utility does business.

“I question myself whether BC Hydro is the most capable, suitable entity to deliver some of these capital projects,” Bennett said.

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.

Video

Today's Headline Videos

Best of Postmedia

Swoop has yet to pick up a single customer, but Canada’s newest ultra-low-cost carrier is already talking about expanding into a market that is just taking off. Launched by WestJet Airlines Ltd., Calgary-based Swoop started booking customers this month for flights that begin this summer connecting five Canadian cities. It is offering discounted fares on […]

Director Ryan Coogler admits he was surprised by the initial feedback he got from the bigwigs at Marvel Studios when he began sharing his vision for its next franchise, Black Panther. After all, he was set to make a $200-million epic blockbuster; a popcorn movie that mixed dazzling special effects, heart-stopping action sequences and sprawling […]

At the 1988 Winter Olympics in Calgary, Mary Ormsby of the Toronto Star took one look at the fit, spandex-laden forms of the cross-country skiers and declared: “I have found my new sport.” Ormsby wasn’t a typical out-of-shape scribe. She had been an all-American volleyball player at Ohio State, so knew athletics from both sides. […]

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.